Financial bona fides lacking among teens

Posted on: Wednesday, April 03, 2013

While agents' insurance customers are traditionally at least 18 years of age, today's teenagers will eventually need to have coverage of their own. But if more isn't done to train teens about basic financial concepts, it could be difficult for insurance agents to explain key factors that have an impact on rates.

According to new research conducted by education technology company EverFi, Inc., close to 50 percent of students who are currently in high school say that they're unfamiliar with how to establish credit. As industry professionals are aware, credit data plays a role in how insurance rates are assessed, among several other criteria that's used.

What's particularly revealing is what credit score teens often think is a good one. The survey found that, on average, respondents considered a score of 500 to be strong, while 33 percent thought a score of 300 or less was at the very least satisfactory.

The poll also showed that teens today often assumed they were entitled to certain payments from the government. For example, 41 percent of respondents said that they expected to be compensated for all the taxes that they had paid after filing a tax return or that they weren't required to pay federal income taxes whatsoever.

Tom Davidson, CEO of EverFi, indicated that these findings are sobering, given the fact that they will soon be making their own financial decisions.

"Many high school students have little, if any, personal experience in managing their own finances, yet they are just moments away from entering adulthood, opening lines of credit and making financial decisions that will impact their individual futures and our entire global economy," said Davidson. "This cyclical nature of sending students into the 'real world' without sufficient financial education is leaving the next generation unprepared for the challenges they'll face as adults."

Financial literacy is an issue many of today's adult consumers deal with. Polling data from the National Foundation for Credit Counseling reveals that more than three-fourths of consumers in a recent survey had financial worries. These fears may be allayed by providing consumers with a more thorough understanding of money matters.